“The G7 comments were such a divergence from the norm that the markets just jumped on it,” Buskas says. “It was the primary catalyst to sell the dollar, which has been the theme for the past month. The market is awakening to the idea it can no longer wear these rose colored glasses.”
Buskas says the end of Fed rate hikes will leave an unsustainable U.S. structure as the focal point.
“The global imbalance issue will be the driving theme for the U.S. dollar into the second half and 2007,” she says.
The U.S. dollar weakened vs. the euro from a low at $1.21 on April 17 to the $1.29 region as of May 15. A huge down gap is evident on the daily dollar/yen chart on April 21, which started the latest wave of bearishness. Gap top resistance lies at 116.55, but the pair had slumped as low as 108.98 as of May 17.
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